Dear Rusty: I am 63 ½ and I am officially retiring from my job on August 1st because I’m physically unable to do the work anymore. I have qualified for a pension from work and I also want to start receiving my Social Security benefits. What happens if I choose to go back to work full time or part time in the future? Do I continue to receive Social Security? Do I lose anything if this happens? Or have I just frozen my benefits at the current rate? Signed: Retiring Soon
Dear Retiring: Since your full retirement age (FRA) is 66 years of age, you should be aware that if you start your Social Security before you reach your full retirement age your benefit amount will be reduced by 5/9 of 1% for each month early that you claim, so at 63 1/2 the reduction will be 16.7%, and that reduction is permanent. If you claim benefits early and you go back to work before you reach age 66, you will still receive your Social Security benefits, but you will be subject to Social Security’s earnings limit which for 2018 is $17,040. If your annual earnings exceed that limit they will withhold future benefits equal to $1 for every $2 over the limit you are, until the year you reach your full retirement age. In that year, the earnings limit goes way up (by about 2 1/2 times) and the withholding amount is less ($1 for every $3 over the limit). Note that the earnings limits change annually, but the 2018 limit for those who reach their full retirement age this year is $45,360 and $17,040 in the year prior to the year you reach your FRA. If you exceed the earnings limit Social Security will withhold your Social Security benefits until they recover what you owe them due to exceeding the limit. Then, when you reach your full retirement age, they’ll give you time credit for any months you didn’t receive a benefit due to exceeding the earnings limit and recompute your benefit amount as though you applied later than you actually did. By doing this your benefit amount at your FRA will be increased to eventually offset the loss of benefits you suffered while you were working and collecting. Note that Social Security asks that you advise them as soon as you know you will exceed the earnings limit, rather than waiting until they eventually catch up to you when you file your Federal Income Tax Return. And please also note that they don’t withhold partial benefits; they withhold the entire month’s benefit, and if that is more than you owe they will reimburse you any excess they withheld in the following tax year.
The information presented in this article is intended for general information purposes only. The opinions and interpretations expressed are the viewpoints of the AMAC Foundation’s Social Security Advisory staff, trained and accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). NSSA, the AMAC Foundation, and the Foundation’s Social Security Advisors are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government. Furthermore, the AMAC Foundation and its staff do not provide legal or accounting services. The Foundation welcomes questions from readers regarding Social Security issues. To submit a request, contact the Foundation at email@example.com, or visit the Foundation’s website at www.amacfoundation.org.